How The Recovery Could Play Out For Central Florida
Matthew Peddie: Hank, it looks like the US economy is up and running, what can we expect going forward?
Hank Fishkind: Yeah, it sure is. You know, consumers led the charge in the first quarter, but we had strong amounts of business investment, and home building was robust, and inventories were drawn down. So they have to be rebuilt. So all of that means that we’re going to have some of the strongest economic growth over the next two years, probably since the 1950s. You know, with real GDP tracking in this quarter at a 10% rate, we’ll fully recover all of the ground lost probably by June. And if that’s the case, then that’s only six quarters after one of the worst declines ever in US economic history. And it’s a much faster growth than we had after the Great Recession or many other recessions.
MP: So you saying that the economic engine here in Central Florida or the the engine of recovery is going be driven by homebuilding primarily?
HF: Well, homebuilding; a big rebound in leisure travel, and big in movement of retirees. The reopening of the economy, especially on the service side, is very beneficial for Florida, and in particular Central Florida.
MP: Well, let’s talk about the surge in US GDP growth and what that means for Florida. Just unpack that a little for us, if you could.
HF: Even though Florida’s GDP data isn’t going to be released till next year, I can give you a really good estimate. I mean, based on the historical data, there’s a very high correlation between growth in real US GDP and Florida’s GDP. So that means the two track very closely together. And interestingly, the amplitude up and down for Florida’s GDP is greater than the US, so when the US economy is growing, Florida will grow even faster. I’d estimate, you know, Florida, 8% plus, and Central Florida really cranking up now with leisure travel, and it should be 8% plus as well.
MP: Well, okay, so why do you think that?
HF: Well, it’s the big surge in leisure travel on the reopening of the service industries, and a resumption of cruising, so for Orlando, all of that’s very good news. Now, we would be even better, but business travel’s very weak still, as is the convention business, but the top line numbers are going to be great, but even as great as they are, they really do obscure some painful and lingering impacts of the recession. Some important structural changes are underway as well, Matthew.
MP: I have heard economists describe the COVID recession and recovery as an unusual K-shaped cycle. What does that really mean?
HF: Well, some sectors were just devastated by the recession: tourism, personal services, and all customer facing occupations, they really suffered. But many of those sectors who could work from home, they were unscathed, and the surge in home prices and stocks benefited wealthier households, leaving others further behind. And that’s particularly true in Orlando with our very low wages. And now we have readjustments underway that were unleashed by the surprising success of work from home, and that too, is going to have a very uneven impact.
MP: Right, and we’ve talked about that before with you, Hank, but just explain if you could have working from home is having such a big impact on the economy.
HF: Well, for many occupations, not just many businesses, but for those occupations, even in businesses that can work from home, what we’re going to see is hybrid work staffing with rotating cadres of staff coming into the office maybe one or two days a week and working from home the rest of the time. And that will have a huge effect because if we even assume that 25% of all employees work from home on an average workweek, that’s a 25% drop in the need for offices, with less demand for parking and coffee shops and restaurants and all the things that depend on those office workers. So there’s major readjustments underway now Matthew.
MP: Hank Fishkind is WMFE’s economic analyst. Thank you so much for your time. I appreciate it.
HF: Thank you, Matt.